The states with the highest (& lowest) auto loan debt

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The states with the highest (& lowest) auto loan debt

Buying a new car is a big money move and can take effort, from choosing the right model to picking the perfect color. There is no better feeling than driving your purchase off the lot, smelling that new car smell. But without planning, purchasing a car can put you deep into debt.

Auto loan debt has increased across the country. The New York Federal Reserve Bank reports the average household auto debt in 2017 was $4,520, up from $3,420 in 2013. Total auto loan balances in America have increased by $540 billion since 2010 to $1.24 trillion, an 8-year upward trend.

Average auto debt ranges widely state to state, from $3,560 in New York to $6,520 in Texas. Here's a list of the states with the highest and lowest auto loan debt according to statistics from the Federal Reserve Bank of New York.

States with highest auto loan debt

Average auto loan debt per capita:

12. North Dakota - $5,020
11. Utah - $5,020
10. Nevada - $5,020
9. Oklahoma- $5,050
8. Maryland - $5,110
7. New Mexico - $5,190
6. New Hampshire - $5,220
5. Arkansas - $5,240
4. Wyoming - $5,240
3. Georgia - $5,260
2. Louisiana- $5,550
1. Texas - $6,520

States with lowest auto loan debt

Average auto loan debt per capita:

10. Kentucky - $3,780
9. Oregon - $3,770
8. Michigan - $3,690
7. Hawaii - $3,650
6. Rhode Island - $3,610
5. Connecticut - $3,600
4. Wisconsin - $3,580
3. New York - $3,560
2. District of Columbia - $3,010
1. Puerto Rico - $2,320

How to minimize debt

Consumers take on auto debt when the borrow money to buy a car. Julie Blackley, communications director of ISeeCars.com, said the growing number of car buyers and rising car prices has led to increased auto debt.

Blackley said consumers looking to take on less debt should be smart when looking for a car.

“You should be shopping around for a car like you look for a house,” she said. “You have options.”

Blackley said buyers should consider financing through a bank instead of through a car dealer. Dealers can profit from auto loans, which means their prices may be higher. She also suggests “choosing the loan for the shortest amount of time you can afford.”

Consumers may think they are getting a deal by choosing lower payments for a longer lease, but as interest accumulates, they may end up paying more in the long run, Blackley said.

If you are on a tight budget, purchasing an older used car may be for you.

"Cars are lasting longer than ever," Blackley said. "You can get a really good deal on a car with more miles on it."

Before any major purchase, make sure you can fully afford it, and that you have the right credit to qualify for a loan. A low credit score can lead to higher interest rates on your loan, which can make it harder to pay off.

Also think about the additional costs — like auto insurance, which is required in almost every state.

Here are more ways to save $5,000 on your next car loan.

Image: PeopleImages